<div id="readability-page-1"><div><p>The most recent earnings report from <strong>NEXON Co., Ltd.</strong> (TSE:3659) was disappointing for shareholders.  Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.</p><p>AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.</p><figure><img height="1120" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/142745502-earnings-and-revenue-history-1-dark-2/1771541951661?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1642" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/142745502-earnings-and-revenue-history-1-dark-2/1771541951661"/><figcaption>TSE:3659 Earnings and Revenue History February 19th 2026</figcaption></figure> <h2> Examining Cashflow Against NEXON's Earnings </h2><p> One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the <strong>accrual ratio</strong>. To get the accrual ratio we first subtract FCF from profit for a period, and then divide that number by the average operating assets for the period.  The ratio shows us how much a company's profit exceeds its FCF. </p><p> Therefore, it's actually considered a good thing when a company has a negative accrual ratio, but a bad thing if its accrual ratio is positive.  While it's not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow.  That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth. </p><p> NEXON has an accrual ratio of -0.21 for the year to December 2025.   That implies it has very good cash conversion, and that its earnings in the last year actually significantly understate its free cash flow.    In fact, it had free cash flow of JP¥162b in the last year, which was a lot more than its statutory profit of JP¥92.1b.    NEXON shareholders are no doubt pleased that free cash flow improved over the last twelve months.     However, that's not all there is to consider.  We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio.   </p><p><span> Check out our latest analysis for NEXON </span></p><p> That might leave you wondering what analysts are forecasting in terms of future profitability.  Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.  </p><h2> How Do Unusual Items Influence Profit? </h2><p> NEXON's profit was reduced by unusual items worth JP¥13b in the last twelve months, and this helped it produce high cash conversion, as reflected by its unusual items.  This is what you'd expect to see where a company has a non-cash charge reducing paper profits.   While deductions due to unusual items are disappointing in the first instance, there is a silver lining.  We looked at thousands of listed companies and found that unusual items are very often one-off in nature.  And that's hardly a surprise given these line items are considered unusual.   Assuming those unusual expenses don't come up again, we'd therefore expect NEXON to produce a higher profit next year, all else being equal.   </p> <h2>Our Take On NEXON's Profit Performance</h2><p> In conclusion, both NEXON's accrual ratio and its unusual items suggest that its statutory earnings are probably reasonably conservative.       After considering all this, we reckon NEXON's statutory profit probably understates its earnings potential!     Keep in mind, when it comes to analysing a stock it's worth noting the risks involved.    Case in point: We've spotted <strong>3 warning signs for NEXON</strong> you should be aware of.  </p><p> After our examination into the nature of NEXON's profit, we've come away optimistic for the company.   But there are plenty of other ways to inform your opinion of a company.  For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying.  While it might take a little research on your behalf, you may find this <strong>free</strong>  collection of companies boasting high return on equity, or  this list of stocks with significant insider holdings to be useful.  </p><div><h3>Valuation is complex, but we're here to simplify it.</h3><p>Discover if NEXON might be undervalued or overvalued with our detailed analysis, featuring <strong>fair value estimates, potential risks, dividends, insider trades, and its financial condition.</strong></p><p>Access Free Analysis</p></div></div></div>

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<p>NEXON Co., Ltd. (TSE:3659) reported disappointing earnings, but analysis suggests strong cash conversion with a negative accrual ratio of -0.21, indicating earnings may understate free cash flow. Unusual items reduced profit by JP¥13b, but these are often one-off, suggesting potential for higher future profits. Despite current challenges, optimism remains for NEXON's earnings potential, though investors should be aware of associated risks.</p>

We Think You Can Look Beyond NEXON's (TSE:3659) Lackluster Earnings